Critical Survey: Royal Caribbean Cruises (RCL) versus Norwegian Cruise Line Holdings (NCLH)

Royal Caribbean Cruises (NYSE: RCL) and Norwegian Cruise Line Holdings (NASDAQ:NCLH) are both large-cap consumer discretionary companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, valuation, earnings and profitabiliy.

Dividends

Royal Caribbean Cruises pays an annual dividend of $1.92 per share and has a dividend yield of 1.7%. Norwegian Cruise Line Holdings does not pay a dividend. Royal Caribbean Cruises pays out 29.7% of its earnings in the form of a dividend. Norwegian Cruise Line Holdings has raised its dividend for 5 consecutive years.

Risk & Volatility

Royal Caribbean Cruises has a beta of 1.06, suggesting that its stock price is 6% more volatile than the S&P 500. Comparatively, Norwegian Cruise Line Holdings has a beta of 1.16, suggesting that its stock price is 16% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Royal Caribbean Cruises and Norwegian Cruise Line Holdings, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Royal Caribbean Cruises 1 2 14 0 2.76
Norwegian Cruise Line Holdings 0 7 6 0 2.46

Royal Caribbean Cruises presently has a consensus price target of $101.68, suggesting a potential downside of 9.10%. Norwegian Cruise Line Holdings has a consensus price target of $51.00, suggesting a potential downside of 5.87%. Given Norwegian Cruise Line Holdings’ higher probable upside, analysts plainly believe Norwegian Cruise Line Holdings is more favorable than Royal Caribbean Cruises.

Insider and Institutional Ownership

71.1% of Royal Caribbean Cruises shares are owned by institutional investors. Comparatively, 85.9% of Norwegian Cruise Line Holdings shares are owned by institutional investors. 15.3% of Royal Caribbean Cruises shares are owned by company insiders. Comparatively, 1.0% of Norwegian Cruise Line Holdings shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Royal Caribbean Cruises and Norwegian Cruise Line Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Royal Caribbean Cruises 16.29% 15.91% 6.30%
Norwegian Cruise Line Holdings 12.57% 16.76% 5.75%

Earnings and Valuation

This table compares Royal Caribbean Cruises and Norwegian Cruise Line Holdings’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Royal Caribbean Cruises $8.59 billion 2.80 $2.52 billion $6.47 17.29
Norwegian Cruise Line Holdings $4.95 billion 2.49 $1.39 billion $2.73 19.85

Royal Caribbean Cruises has higher revenue and earnings than Norwegian Cruise Line Holdings. Royal Caribbean Cruises is trading at a lower price-to-earnings ratio than Norwegian Cruise Line Holdings, indicating that it is currently the more affordable of the two stocks.

Summary

Royal Caribbean Cruises beats Norwegian Cruise Line Holdings on 11 of the 17 factors compared between the two stocks.

About Royal Caribbean Cruises

Royal Caribbean Cruises Ltd. is a cruise company. The Company owns and operates three global cruise brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises (Global Brands). The Company also own joint venture interest in the German brand TUI Cruises, interest in the Spanish brand Pullmantur and interest in the Chinese brand SkySea Cruises (collectively, Partner Brands). Together, its Global Brands and its Partner Brands operate a combined total of 49 ships in the cruise vacation industry with an aggregate capacity of approximately 123,270 berths as of December 31, 2016. As of December 31, 2016, the Company’s ships offer a selection of itineraries that call on approximately 535 destinations in 105 countries, covering all seven continents. Royal Caribbean International offers a range of itineraries to the destinations, including Alaska, Asia, Australia, Canada, the Caribbean, the Panama Canal and New Zealand with cruise lengths that range from 2 to 24 nights.

About Norwegian Cruise Line Holdings

Norwegian Cruise Line Holdings Ltd. (NCLH) is a global cruise company. The Company operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. The Company had 25 ships with approximately 50,400 Berths, as of May 1, 2017. The Company’s brands offer itineraries to various destinations around the world, including Europe, Asia, Australia, New Zealand, South America, Africa, Canada, Bermuda, Caribbean, Alaska and Hawaii. The Company’s brands offer various features, amenities, and activities, including various accommodations, multiple dining venues, bars and lounges, spa, casino and retail shopping areas and various entertainment choices. All the brands offer a selection of shore excursions at each port of call, as well as hotel packages for stays before or after a voyage. As of December 31, 2016, its Norwegian offered 14 ships that were purpose-built to deliver the Freestyle Cruising product, which offered freedom, flexibility and choice to its guests.

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